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Frequency Faux Pas

The Federal Communications Commission was twice smacked hard in the face: first when an appeals court overturned the panel's decision to take back and reauction NextWave Telecom's wireless licenses and then again when the U.S. Supreme Court said it wouldn

The Federal Communications Commission was twice smacked hard in the face: first when an appeals court overturned the panels decision to take back and reauction NextWave Telecoms wireless licenses and then again when the U.S. Supreme Court said it wouldnt consider the FCCs plan to repo bankrupt Metro PCS licenses. But the FCC was due to pay some serious penance for misstepping again and again in the name of greed.

Greed drove the design of the auction system for distributing licenses in the first place, as the FCC apparently dreamed of filling the governments coffers. It was greed again that led the FCC to pursue the NextWave case for years after the start-up defaulted on payments and lower courts ruled that the operator had to pay only a fraction of what it bid for the spectrum.

Of course its easy to say this now, but deciding to reauction licenses that may have legally belonged to NextWave had to have been the dumbest idea ever. The reauction only closed in January and this fight has been going on since 1996. Couldnt the FCC have waited another few months for the courts decision? The FCC now has a huge mess on its hands, and some people are saying that the government — which counted on the $17 billion that operators bid during the reauction — may have to dip into the Medicare surplus to round out the budget.

And what of the legitimate license winners in the reauction, such as Verizon Wireless? While they knew the risks, they presumably factored that spectrum into future plans. Those operators may still get their hands on the licenses, but at what cost is not yet clear.

Further reading

I beg of the FCC to learn from past mistakes and decide not to hold future auctions of licenses that arent available — namely the 700-megahertz auction, which is a disaster waiting to happen. The FCC wants to auction off those licenses while current analog television stations still own the frequencies — a plan that has all the makings of another decades-long legal battle.